By Almot Maqolo.
Harare, Zimbabwe (News of The South) – In their Q3 trading update Larfarge have noted that they experienced a 19% decline in consumer demand due to low disposable incomes as wages are not tracking inflation as much as costs are.
The company is satisfied with the drop as it is in line with the 5.3% contraction of GDP projected by the International Monetary Fund. Apart from low wages the cost of borrowing has also reduced mortgages with lending rates as high as 30% in the quarter, demand has been reduced.
On the operating environment foreign currency shortage has been a problem for the Company as they have made CAPEX projects slow their pace and also late payments for spares procurement
Despite all the problems the company has only experienced a 1% drop in production in comparison in the same period last year.
In order to combat these problems, the company is in a Us$15 million CAPEX project drive. Larfarge is projecting a boom in the construction industry in the year 2020 and they are getting ready for it with a an expansion of their cement producing plants.
The projects are already underway with a power generating plant already on site for alternative power from ZESA and the Dry Mortar Mix plant expansion already in motion. To complete the investment drive the expansion of the Cement milling plant expansion will start in the first quarter of 2020.
Despite the USD15m projects the company plans to initiate a major plant shutdown in Q4 as a they anticipate a flat demand curve in the last quarter. The company is in negotiations with the RBZ for a USD25.5m external Shareholder loan which the firm plans to use in its CAPEX projects.
Comments
About Author
